A rectangle is a continuation of the model, which is formed as the trading range during a pause in the trend. The model easily determined in the presence of two comparable maxima and minima of the two comparable. Maximum and minimum may be linked to form two parallel lines that make up the top and the base of the rectangle. The rectangles are sometimes referred to as trading ranges, areas of consolidation or congestion of the area.
There are many similarities between the models of "rectangle" and "symmetrical triangle". While both are usually continuation patterns, they can also note the significant tops and bases of trend. As in the case of the "symmetrical triangle" model "box" was not completed until a breakthrough occurred. Sometimes can be found some hints, but the line break is usually indeterminable in advance. Let's examine each part of the rectangle, and then look at an example.
1. Trend: To qualify as a model for the continuation of a rectangle, must exist prior to the time trend. Ideally, if the trend continues far enough, but not too mature. The more mature will be the trend, the less likely it is the continuation of the model.
2. 4 points: must be at least two equivalent maximum reaction to form the upper resistance line and the two equivalent minimal reaction to form the bottom line of support. They do not necessarily have to be exactly equal, but must be located within sufficient proximity to each other. Although not required, but preferable to maximum and minimum alternated between them.
3. Size: as opposed to "symmetrical triangle, rectangle does not show the standard models of volume. Sometimes the volume is reduced as the model develops. On another occasion the volume will move along a spiral, as the price is moving between support and resistance. Rarely volume will increase as the development model. If the volume is reduced, it is better to look for expansion in the break to confirm. If the volume is moving in a spiral, to better evaluate what traffic (increasing the resistance or to reduce the support) are more. This type of assessment of the volume can serve as hint on the direction of future breakthroughs.
4. Contrast: rectangles can range from a few weeks to many months (for the day-scale). If the pattern continues less than 3 weeks, it is usually considered a "flag" as a model to continue. Ideally, if the rectangle will develop for the 3-month period. In general, the longer the formation model, the more significant will be a breakthrough. From the 3-month-old model, you can expect that a breakthrough will meet its projected goal. However, the 6-month-old model, you can expect that a breakthrough will exceed the estimated target.
5. The direction of a breakthrough: the direction of the next significant movement can be determined only after the break. As in the case of the "symmetrical triangle, rectangles are neutral models, which depend on the direction of future breakthroughs. Models can sometimes amount to offer a hint, but no confirmation until the real breakthrough occurred above resistance or below support.
6. Confirmation of a breakthrough: to make a breakthrough to be valid, it must be based on closing prices. Some traders use a filter for the price (3%), time (3 days) or volume (expansion) to confirm the break.
7. Return to a breakthrough: the basic principle of technical analysis is that broken support turns into potential resistance, and vice versa. After a break above resistance (nizhepodderzhki), sometimes return to test this newly-level support (resistance). Return to the original level of breakthrough could provide an excellent opportunity to enter the market.
8. Objective: The planned value of the movement is by measuring the height of the rectangle, and he measured the distance from the point of breakthrough. The rectangles represent the trading range, which turns fierce struggle between the bulls and bears. When the price is near support, customers come into the game and pushed the price up. When the price is near the level of resistance, bears intercept the initiative and drive the price down. Literate traders often play on these strong push by buying some level of support and selling near resistance levels. One group (bulls or bears), in the end, exhausted itself, and there is a winner, when the breakthrough occurs. Again, it is important to remember that the rectangles have a neutral bias. Even though sometimes there may be hints in the form of other aspects of technical analysis, the actual price effect reflects market conflict. Only, until a breakthrough does not occur above the level of resistance or lower level of support will not be clear which group has won the battle.
During the summer of 1999., "Micron Electronics" has risen from about the twentieth to the fortieth figures. Once the resistance of about 42, the price settled in trading range between 30 and 40, forming a rectangle.
. increase from the twentieth to the fortieth figure was pre-installed interim trend. However, at the time it was unclear whether this trading range of the model of turn or continue. The horizontal line of resistance at 40 could be extended back to the peak in February 1999, which notes the serious level of resistance.
. red line resistance at 40 was formed by three reactionary maxima. First up may cause some suspicion, but the second and third are fairly clear. A parallel line of support at 30 has been raised three times and established a strong level of support. Once the maximum has been made in paragraph 5, the model "square" was formed.
As the model evolved, the volume fluctuated and there was no clear sign (bullish or bearish break) until mid-February. The first sign appeared bullish when the price dropped from 38 to 31, and Cash flow Chaikin was not able to go down below -10%. Cash flow was steady throughout the decline and has returned to positive territory as soon as the direction of the market turned up. By the time the price reached a mark of 39 3 / 4 (exceeds its previous maximum of the reaction), Chaikin Money flow was at level of 20%. Also, pay attention to increasing the force after a higher minimum.
. length of the model was 5 months. Because of the long-term ceiling of resistance at 40, the model required more time to consolidate before the breakthrough. Over a long consolidation offers hope for more traffic after the break.
. breakthrough came with a large and sudden increase in traffic above the level of resistance.
. after the breakthrough was a small roll to about 46, but if the volume pointed to a huge boost. The market is not always returned to the level of a breakthrough. In the considered example, the price makes a classic return to the level of a breakthrough. Formed pattern and strength of a breakthrough were to be evaluated properly to determine whether to enter the market after the downgrade.
. to improve after the break was 10 points, which were the width of the model. However, based on the length of the model and force a breakthrough, and an increase in new highs, it was clear that this was no ordinary break. Therefore, a standard design goal was useless. After the initial raise to 55 13/16, the market is back to level 46 and then rose above level 70. Subsequently developed a range of other trade resistance at the bottom of the 70th figure, and support at the top of the 40th figure.
There are many similarities between the models of "rectangle" and "symmetrical triangle". While both are usually continuation patterns, they can also note the significant tops and bases of trend. As in the case of the "symmetrical triangle" model "box" was not completed until a breakthrough occurred. Sometimes can be found some hints, but the line break is usually indeterminable in advance. Let's examine each part of the rectangle, and then look at an example.1. Trend: To qualify as a model for the continuation of a rectangle, must exist prior to the time trend. Ideally, if the trend continues far enough, but not too mature. The more mature will be the trend, the less likely it is the continuation of the model.
2. 4 points: must be at least two equivalent maximum reaction to form the upper resistance line and the two equivalent minimal reaction to form the bottom line of support. They do not necessarily have to be exactly equal, but must be located within sufficient proximity to each other. Although not required, but preferable to maximum and minimum alternated between them.
3. Size: as opposed to "symmetrical triangle, rectangle does not show the standard models of volume. Sometimes the volume is reduced as the model develops. On another occasion the volume will move along a spiral, as the price is moving between support and resistance. Rarely volume will increase as the development model. If the volume is reduced, it is better to look for expansion in the break to confirm. If the volume is moving in a spiral, to better evaluate what traffic (increasing the resistance or to reduce the support) are more. This type of assessment of the volume can serve as hint on the direction of future breakthroughs.
4. Contrast: rectangles can range from a few weeks to many months (for the day-scale). If the pattern continues less than 3 weeks, it is usually considered a "flag" as a model to continue. Ideally, if the rectangle will develop for the 3-month period. In general, the longer the formation model, the more significant will be a breakthrough. From the 3-month-old model, you can expect that a breakthrough will meet its projected goal. However, the 6-month-old model, you can expect that a breakthrough will exceed the estimated target.
5. The direction of a breakthrough: the direction of the next significant movement can be determined only after the break. As in the case of the "symmetrical triangle, rectangles are neutral models, which depend on the direction of future breakthroughs. Models can sometimes amount to offer a hint, but no confirmation until the real breakthrough occurred above resistance or below support.
6. Confirmation of a breakthrough: to make a breakthrough to be valid, it must be based on closing prices. Some traders use a filter for the price (3%), time (3 days) or volume (expansion) to confirm the break.
7. Return to a breakthrough: the basic principle of technical analysis is that broken support turns into potential resistance, and vice versa. After a break above resistance (nizhepodderzhki), sometimes return to test this newly-level support (resistance). Return to the original level of breakthrough could provide an excellent opportunity to enter the market.
8. Objective: The planned value of the movement is by measuring the height of the rectangle, and he measured the distance from the point of breakthrough. The rectangles represent the trading range, which turns fierce struggle between the bulls and bears. When the price is near support, customers come into the game and pushed the price up. When the price is near the level of resistance, bears intercept the initiative and drive the price down. Literate traders often play on these strong push by buying some level of support and selling near resistance levels. One group (bulls or bears), in the end, exhausted itself, and there is a winner, when the breakthrough occurs. Again, it is important to remember that the rectangles have a neutral bias. Even though sometimes there may be hints in the form of other aspects of technical analysis, the actual price effect reflects market conflict. Only, until a breakthrough does not occur above the level of resistance or lower level of support will not be clear which group has won the battle.
During the summer of 1999., "Micron Electronics" has risen from about the twentieth to the fortieth figures. Once the resistance of about 42, the price settled in trading range between 30 and 40, forming a rectangle.. increase from the twentieth to the fortieth figure was pre-installed interim trend. However, at the time it was unclear whether this trading range of the model of turn or continue. The horizontal line of resistance at 40 could be extended back to the peak in February 1999, which notes the serious level of resistance.
. red line resistance at 40 was formed by three reactionary maxima. First up may cause some suspicion, but the second and third are fairly clear. A parallel line of support at 30 has been raised three times and established a strong level of support. Once the maximum has been made in paragraph 5, the model "square" was formed.
As the model evolved, the volume fluctuated and there was no clear sign (bullish or bearish break) until mid-February. The first sign appeared bullish when the price dropped from 38 to 31, and Cash flow Chaikin was not able to go down below -10%. Cash flow was steady throughout the decline and has returned to positive territory as soon as the direction of the market turned up. By the time the price reached a mark of 39 3 / 4 (exceeds its previous maximum of the reaction), Chaikin Money flow was at level of 20%. Also, pay attention to increasing the force after a higher minimum.
. length of the model was 5 months. Because of the long-term ceiling of resistance at 40, the model required more time to consolidate before the breakthrough. Over a long consolidation offers hope for more traffic after the break.
. breakthrough came with a large and sudden increase in traffic above the level of resistance.
. after the breakthrough was a small roll to about 46, but if the volume pointed to a huge boost. The market is not always returned to the level of a breakthrough. In the considered example, the price makes a classic return to the level of a breakthrough. Formed pattern and strength of a breakthrough were to be evaluated properly to determine whether to enter the market after the downgrade.
. to improve after the break was 10 points, which were the width of the model. However, based on the length of the model and force a breakthrough, and an increase in new highs, it was clear that this was no ordinary break. Therefore, a standard design goal was useless. After the initial raise to 55 13/16, the market is back to level 46 and then rose above level 70. Subsequently developed a range of other trade resistance at the bottom of the 70th figure, and support at the top of the 40th figure.
Forex Magazine
based on www.stockcharts.com
based on www.stockcharts.com
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